The renminbi’s hardest mile is only beginning

Financial Times Europe11 Aug 2026Alicia García-Her rero Alicia García-Her rero is chief eco nom ist for Asia Pacific at Natixis and senior research fel low at Brue gel

The debate about the ren minbi’s global rise usu ally gets the sequen cing wrong. Ittreats inter na tion al isa tion as a single ascent, with reserve-cur rency status at thesum mit.

In prac tice there are three sep ar ate climbs of very dif fer ent diffi  culty: trade, bor -row ing and, hard est of all, invest ment. China has made pro gresson the first twoover 15 years. The last — per suad ing for eign ers to hold ren minbi as an invest ment— has only now star ted, and last June’s Lujiazui Forum in Shang hai set the stage forthe way for ward.

The ortho dox path runs through the cap ital account: open your mar kets, runexternal defi cits, let non-res id ents accu mu late your cur rency. But China can not andwill not take that route. So it has pushed the ren minbi out ward by other means —trade set tle ment and credit exten ded by its own banks.

Both have worked. The ren minbi share of China’s goods trade has roughly doubledsince 2018 and the cur rency now ranks second in global trade fin ance, ahead of theeuro — driven as much by the weapon isa tion of the dol lar as by China’s lever age asthe world’s largest com mod ity buyer. Fund ing has fol lowed: the ren minbi becameone of Asia’s cheapest fund ing cur ren cies and Chinese banks have been increas inglend ing to over seas cli ents.

Hold ing a cur rency is a dif fer ent act. A cur rency becomes a reserve asset not whenit is used but when it is will ingly kept — because the assets denom in ated in it canbe traded deeply, fin anced against and hedged at will, in good times and bad. Thatis why US Treas ur ies sit at the centre of the sys tem.

A for eign insti tu tion hold ing Chinese gov ern ment bonds has had neither com fort.Onshore liquid ity is far thin ner than the US Treas ury mar ket’s, hedging instru mentsare scarce, and repat ri at ing pro ceeds still runs into fric tions a reserve man agercan not ignore. The reluct ance shows in the data: for eign hold ings of onshore bondsare under 2 per cent of the total and down from a peak above 3 per cent and cent ralbank reserves in ren minbi are around 2 per cent as well as flat.

This is what meas ures unveiled at the June forum are meant to address: the firstcoher ent attempt to build the miss ing plumb ing without touch ing con vert ib il ity. Aliquid ity back stop for for eign and inter na tional mon et ary author it ies announcedby the PBoC in June mod els a sim ilar struc ture to the Fed eral Reserve.

In addi tion, Hong Kong is launch ing Chinese gov ern ment bond futures, clos ing thegap in hedging facil it ies that has kept large global man agers on the side lines. And anas cent secur it ies depos it ory based in Hong Kong, Omni clear, focuses on off shoreren minbi set tle ments, which could become an altern at ive to Euroclear. Each tacklesa real obstacle to hold ing, rather than merely using, the cur rency, poten tially fos ter -ing its use as invest ment cur rency.

Yet the con straints remain unfor giv ing, and every fix is a second-best. The repofacil ity is open only to the offi cial sec tor. A back stop sup plied at the dis cre tion of theissu ing cent ral bank is only as good as that dis cre tion — and reserve man agersdiver si fy ing because the dol lar was turned into an instru ment of policy will not beblind to the polit ics ofa cur rency whose issuer has more room to inter vene. A par al -lel set tle ment rail car ries no weight until oth ers use it; the net work effects thatmake Euroclear and the dol lar’s plumb ing indis pens able can not be legis lated intoexist ence.

And the eco nom ics point the wrong way: onshore yields have fallen so far thatChinese bonds now offer some of the world’s low est returns, so they hold littleappeal for any investor. is left is the case for diver si fic a tion alone.

That is Beijing’s bet — that the desire to move away from the dol lar will out weighthese fric tions for at least some offi cial hold ers. At the mar gin it may be right. But itruns into the con tra dic tion at the heart of the project. Trade invoicing can be engin -eered and credit exten ded by fiat; genu ine demand to hold ren minbi assets can not.It requires ced ing con trol — over prices, over exit, over the cap ital account itself —and con vin cing oth ers the con trol will not be reas ser ted the moment it becomesincon veni ent. But, of course, con trol is what Beijing refuses to give up.

The dir ec tion of travel is not in doubt, and a frac tur ing global eco nomy is doingmuch of Beijing’s work for it. But whether the ren minbi becomes a cur rency theworld chooses to save in — rather than one it is merely paid in — is a ques tion anadmin is trat ive push can not answer. It is the hard est mile, and it has only justbegun